AMD Shares Rise 3% As Analyst Upgrades To Buy

Advanced Micro Devices (AMD) was up 3.4% in late trading Tuesday after an analyst upgraded the stock to buy from neutral, saying supply issues that constrained the chipmaker's performance have "finally cleared."

JoAnne Feeney, an analyst at Longbow Research, expects production capacity to be more than 50% above last year and now expects full-year earnings of 82 cents a share, up from her prior estimate of 71 cents. That's well above consensus estimates of 65 cents as polled by Thomson Reuters.

The supply constraints were connected to AMD's business relationship with its chip wafer producer, GlobalFoundries. Spun off from AMD in 2009, GlobalFoundries is based in Germany.

"AMD had design wins and could not meet customer demand," Feeney told IBD. "It looks like all the bugs are out and they are no longer supply constrained.

"Product roadmap and design wins point to further market-share gains in server and notebook processors."

Canaccord Genuity analyst Bobby Burleson agrees. He increased his price target for the stock to 9 from 7 following AMD's meeting with analysts on Thursday, and reiterated his buy recommendation. While nothing at the event appeared to be groundbreaking, according to a Canaccord note issued Monday, Burleson "left with greater conviction regarding the company's ability to execute, both for manufacturing (fewer foundry missteps going forward) and design (zealously focusing on growth opportunities)."

At the Feb. 2 meeting, AMD introduced its new management team headed by Rory Read, who took over as CEO in August.

Improvements at AMD are being "brought to fruition by the new management team," analyst Feeney said in a research note. "Changes in internal organization, incentives and responsibilities are improving quality control and bringing consistency to roadmap progress and product delivery schedules. Look for this to strengthen adoption of AMD processors by PC customers."

Advanced Micro Devices (AMD) was up 3.4% in late trading Tuesday after an analyst upgraded the stock to buy from neutral, saying supply issues that constrained the chipmaker's performance have "finally cleared."

JoAnne Feeney, an analyst at Longbow Research, expects production capacity to be more than 50% above last year and now expects full-year earnings of 82 cents a share, up from her prior estimate of 71 cents. That's well above consensus estimates of 65 cents as polled by Thomson Reuters.

The supply constraints were connected to AMD's business relationship with its chip wafer producer, GlobalFoundries. Spun off from AMD in 2009, GlobalFoundries is based in Germany.

"AMD had design wins and could not meet customer demand," Feeney told IBD. "It looks like all the bugs are out and they are no longer supply constrained.

"Product roadmap and design wins point to further market-share gains in server and notebook processors."

Canaccord Genuity analyst Bobby Burleson agrees. He increased his price target for the stock to 9 from 7 following AMD's meeting with analysts on Thursday, and reiterated his buy recommendation. While nothing at the event appeared to be groundbreaking, according to a Canaccord note issued Monday, Burleson "left with greater conviction regarding the company's ability to execute, both for manufacturing (fewer foundry missteps going forward) and design (zealously focusing on growth opportunities)."

At the Feb. 2 meeting, AMD introduced its new management team headed by Rory Read, who took over as CEO in August.

Improvements at AMD are being "brought to fruition by the new management team," analyst Feeney said in a research note. "Changes in internal organization, incentives and responsibilities are improving quality control and bringing consistency to roadmap progress and product delivery schedules. Look for this to strengthen adoption of AMD processors by PC customers."

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12/09/2014 06:24 PM ET

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